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INTERESTS IN LAND - Restrictive covenants - General principles - Benefit - Burden - Creation - Covenants at law (leasehold covenant) - Running with land - Benefit - Burden

Monday, June 19, 2017 @ 11:43 AM  

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Appeal by property owners from a decision that they were required to pay an annual levy as a contribution to maintenance costs and taxes for a small community on private land. The properties within the community were subject to a Trust Deed. Under the terms of the Trust Deed, the original covenanters agreed to appoint trustees to hold certain property for the benefit of the original covenanters and persons claiming through them. The original parties granted their interests in the lands comprising the community property to the trustees. The trustees were charged with maintaining the community property and were authorized to charge a levy to property owners in the community for maintenance of the community property and to pay the property taxes. The appellants, a husband and wife, began living at a property that backed onto the community. The property was owned by the husband’s father and was transferred to the appellants upon his death. Unlike other properties in the community, the appellants’ property was accessed and serviced by a public municipal road. The appellants claimed that they derived no benefit from the expenditure of the levy, disclaimed any benefit from their property’s inclusion in the community and maintained that they never agreed to pay the annual levy. They also wished to be excluded from any use of common property. The trustees argued that because the appellants were owners of a property within the community, they were beneficiaries under the Trust Deed and therefore had an obligation to pay their proportionate share of expenses incurred by the trustees in relation to the common property. In a previous action, the trustees successfully sued the father for non-payment of maintenance fees. The appellants did not pay the levy after they took title to the property and therefore the trustees sued them to recover the amount owing. The Deputy Judge found that the Trust Deed was a positive covenant that did not run with the land and that the “benefit and burden exception” recognized under English law was not available in Ontario. The trustees appealed the decision, arguing that the Deputy Judge gave insufficient reasons, made palpable and overriding errors, and erred in law and jurisdiction. The appeal judge allowed the appeal finding that the reasons were legally insufficient and tainted by several factual and legal errors. In light of the errors she found, the appeal judge conducted her own analysis. The appeal judge found that the appellants were bound by the Trust Deed and were obliged to pay their annual levies for the benefits received. She found that both the benefits and burden and the conditional grant exceptions to the positive covenants formed part of Ontario law and were applicable to the present case. Accordingly, she allowed the appeal and ordered the appellants to pay the unpaid levies for 2010 to 2013 in the amount of $12,799 and granted an unqualified declaration that they were liable to pay the annual levies assessed against their property in accordance with the Trust Deed.

HELD: Appeal allowed. The appeal judge erred in law by failing to follow binding appellant precedent, namely the Court of Appeal’s majority decision in Amberwood, and by holding that the benefit and burden and the conditional grant exceptions to the positive covenants rule applied. The judge could not decline to follow a binding precedent of a higher court on the ground that she disagreed with it or because it appeared to have been overtaken by subsequent decisions of a lower court. The benefit and burden exception to the positive covenants rule did not form part of Ontario law. The fact that the appellants had knowledge of the Trust Deed was not a bar to the operation of the positive covenants rule. The appellants had never paid the levy since they acquired the property, never agreed to pay the levies and disclaimed any benefits under the Trust Deed. The Trust Deed did not provide that the right to use the common property conferred under the Trust Deed was conditional upon the acceptance of the burdens in the covenants. The judgment of the Deputy Judge was restored.

Black v. Owen, [2017] O.J. No. 2564, Ontario Court of Appeal, K.N. Feldman, E.A. Cronk and B. Miller JJ.A., May 18, 2017. Digest No. TLD-June192017002